How does a 1099-misc for 7200 reduce my retrun from receiving $2300 to Owing $320?

[rjs · Accepted solution]

If the 1099-MISC is for self-employment income you have to pay both income tax and self-employment tax on the income. If you are in the 25% tax bracket, the net self-employment tax is about 12.36%.

• Income tax = 25% of $7,200 = $1,800
• Self-employment tax = 12.36% of $7,200 = $890
• Total tax = $1,800 + $890 = $2,690
• $2,300 refund minus $2,690 additional tax = $390 owed

Either the figures you posted are not exact, or some side effect of the added income reduced the amount you owe to $320.